Demand Picks Up for London’s Luxury Residential Market

Sellers reduce prices to make up for increased transaction costs, new report finds

Would-be buyers are seeing opportunities in London’s prime residential market amid double-digit price cuts, according to a new report.

“Prices are already being reduced by 10% to counter higher transactions costs, so we are likely to see further reductions by motivated sellers,” said Philip Eastwood, head of the Buying Solution, a subsidiary of real estate consultancy Knight Frank, in a market report released Tuesday.

New and higher taxes on luxury property introduced in the last 18 months and the uncertainty surrounding the outcome of the Brexit referendum in June resulted in lower buyer demand. The ratio of active buyers per available property in prime central London fell to 5.9 from 11.9 in the year leading up to April 2016, according to the report.

However, demand started to pick up in the city as sellers reduce their asking prices. The number of viewings increased 43% between January and May versus the same period in 2015, and competition remains strong for the best properties, the report states.

Furthermore, the average discount between asking and final sales price was 5.1% in the year leading up to May 2016. And prices, in general, have been moving downward. The annual price growth for prime central London declined to -0.6% in the two years leading up to June 2016, according to the report.

Buying agents are also seeing more clients expanding their areas of search beyond central London, including in areas such as Queen’s Park and Barnes.

“As long as the schools, transport links and restaurants are good enough, there is no stigma anymore,” Mr. Eastwood said.